U.S. Sen. Tom Harkin, D-Iowa, is one of the leaders of a plan to impose a financial transaction tax on the trading of stocks, bonds and derivatives.
Harkin and Rep. Peter DeFazio, D-Ore., introduced the plan Wednesday, a scaled-back version of a previous proposal that failed in the face of criticism from the financial industry and the Treasury Department.
Now, however, with Occupy Wall Street demonstrations flourishing across the country, the lawmakers say the tax will raise revenue for the government and reduce some of the speculative activity they say hurts the economy.
“Wall Street is making tons of money,” Harkin said. “I think it’s fair. I think it’s just. I think it’s a reasonable way of raising revenue.”
The tax of 3 cents for each $100 worth of trades would have little impact on the average household, advocates say. Instead, it would raise money from an industry that critics say fueled the financial collapse.
There is no official estimate of the revenue the tax would raise, but Harkin said it could amount to $200 billion over 10 years. With $14 trillion in debt on the government’s books, Democrats have urged that new revenues be raised. Republicans have rejected that call.
U.S. Rep. Bruce Braley, D-Iowa, also is a co-sponsor of the plan.
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A financial transaction tax is being debated in Europe, too. The European Commission has proposed one, and Harkin said some countries overseas already have one in place. The U.S. did, too, at one time, he said.
The financial industry criticized the proposal Wednesday.
“A financial transaction tax is essentially a sales tax on investors. At a time when we face a slow economic recovery, such a tax will impede the efficiency of markets and impair depth and liquidity as well as raise costs to the issuers, pensions and investors who help drive economic growth,” said Kenneth Bentsen Jr., executive vice president for public policy and advocacy for the Securities Industry and Financial Markets Association.
When a more robust tax was proposed by Harkin and DeFazio about a year ago, Treasury Secretary Tim Geithner opposed it. The administration has proposed a different way of raising revenues from the financial industry, suggesting a “financial crisis responsibility fee” on large banks.
Harkin dismissed the fee, saying it “wouldn’t do anything,” and he urged the president to get behind his plan.
“If the White House isn’t for it, then it makes President Obama look kind of funny,” Harkin said. “He’s coming out bashing Wall Street all the time, but here’s a simple, straightforward tax that hits the speculators more than anyone, and he won’t support it? I think he really ought to think about this one.”